Citation NR: 9730435
Decision Date: 09/03/97 Archive Date: 09/11/97
DOCKET NO. 94-31 025 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in No. Little
Rock, Arkansas
THE ISSUE
Entitlement to waiver of recovery of an overpayment of
improved pension benefits created during the period from
February 1990 through March 1993.
REPRESENTATION
Appellant represented by: Disabled American Veterans
ATTORNEY FOR THE BOARD
K. Hudson, Counsel
INTRODUCTION
The veteran had active service from January 1951 to February
1954, and from April 1955 to May 1958.
This matter comes before the Board of Veterans' Appeals
(Board) on appeal from a regional office (RO) decision of the
Committee on Waivers and Compromises (Committee) dated in May
1994, which denied waiver of recovery of an overpayment in
the calculated amount of $14,017, on the basis that bad faith
had been shown in the creation of the debt. In his
substantive appeal, the veteran, in essence, raised the issue
of whether part of the debt was properly created, contending
that his wife, whose unreported employment income had
resulted in the overpayment, had stopped working in March
1993, and, thus, her income should not be counted after that
date. An award letter from the RO dated in April 1996
indicated that the overpayment was revised to reflect that
she terminated employment in March 1993; however, the
monetary effect of this adjustment on the total overpayment
was not specified. The case was remanded by the Board in
September 1996 to address this matter, to provide a
supplemental statement of the case which discussed the
creation issue, and to provide the veteran and his
representative an opportunity to respond. The audit was
conducted, and the results of the audit, as well as the
supplemental statement of the case, were sent to the veteran
at his last known address; however, the documents were
returned as undeliverable. The RO obtained an additional
address from the veteran’s bank; however, it is not clear
that the information was sent to that new address.
Nevertheless, under the circumstances of this case, we
believe that this uncertainty as to whether the information
was sent to the veteran was harmless error. In this regard,
the supplemental statement of the case did not provide any
pertinent information which had not previously been provided
in the statement of the case. Although the remand directed
that the supplemental statement of the case provide a
discussion of the law and regulations pertaining to the
creation aspect of his claim, we note that the only period
for which the veteran had disputed the creation of the debt,
specifically, the period after March 1993, was favorably
resolved in the veteran’s favor, and the total overpayment
was reduced accordingly, as delineated in an audit dated in
October 1996. Thus, the overpayment has been adjusted to
reflect the cessation of the veteran’s wife’s employment in
March 1993, and there is no remaining dispute involving the
creation of the debt. Moreover, the veteran’s accredited
representative was provided copies of the supplemental
statement of the case and audit, and did not present any
additional arguments.
CONTENTIONS OF APPELLANT ON APPEAL
The veteran essentially contends that he did not act in bad
faith in the creation of the debt; he was simply unaware that
his wife’s income must be reported. He also contends that it
would cause severe financial hardship to him and his family
to require repayment of the debt. He points out that his
financial situation became so precarious that he was forced
to declare bankruptcy.
DECISION OF THE BOARD
The Board, in accordance with the provisions of 38 U.S.C.A.
§ 7104 (West 1991 & Supp. 1997), has reviewed and considered
all of the evidence and material of record in the veteran's
claims file(s). Based on its review of the relevant evidence
in this matter, and for the following reasons and bases, it
is the decision of the Board that waiver of recovery of an
overpayment of improved pension benefits created during the
period from February 1990 through March 1993 is precluded by
bad faith.
FINDINGS OF FACT
1. The appellant was paid improved pension benefits for the
period from February 1990 through March 1993 in an amount
which was based on zero earned income for the veteran’s
spouse, as reported on annual eligibility verification
reports submitted by the veteran.
2. Thereafter, information was received documenting that the
appellant’s spouse had received earned income throughout this
time period, which had not been reported.
3. The RO retroactively adjusted the appellant’s pension
benefits in light of the additional income, resulting in the
creation of the present overpayment.
4. The evidence establishes that there was an intentional
failure to report the veteran’s family income for the purpose
of continued receipt of VA pension benefits to which he was
not entitled.
CONCLUSION OF LAW
Waiver of recovery of the overpayment of improved disability
pension benefits is precluded because of bad faith on the
part of the appellant. 38 U.S.C.A. §§ 5107, 5302 (West
1996); 38 C.F.R. §§ 1.963, 1.965(b) (1996).
REASONS AND BASES FOR FINDINGS AND CONCLUSION
Initially, we find that the appellant’s claim is well-
grounded; that is, it is plausible. 38 U.S.C.A. § 5107(a);
Murphy v. Derwinski, 1 Vet.App. 78 (1991). The relevant
facts have been properly developed, and, accordingly, the
statutory obligation of the Department of Veterans Affairs
(VA) to assist in the development of the appellant’s claim
has been satisfied. Id.
In June 1990, the veteran was awarded improved disability
pension benefits, effective December 1, 1989. His initial
award letter informed him that the pension benefit was paid
to make up the difference between countable annual income and
the maximum annual rate, and that his pension was based on
“0” countable income from any source; identified sources
included earning income, Social Security, retirement,
interest, and other income for himself, his spouse, and his
dependent children. He was further informed that the rate of
pension was directly related to his and his family’s income,
that adjustment to his payments must be made whenever his or
his family’s income changed, and that the VA must be notified
immediately if he or his family received any income from any
source other than that shown. He was further informed that
failure to report income changes could result in the creation
of an overpayment.
In September 1990, the veteran informed the VA that he had
begun receiving Social Security benefits in July 1990. In
September 1990, he was notified of the adjustment to his
award based on the receipt of Social Security benefits.
Again, he was informed that the rate of pension was directly
related to his and his family’s income, that adjustment to
his payments must be made whenever his or his family’s income
changed, and that the VA must be notified immediately if he
or his family received any income from any source other than
that shown. He was further informed that failure to report
income changes could result in the creation of an
overpayment.
In an annual eligibility verification report (EVR) signed in
December 1990, the only source of income reported was Social
Security benefits for the veteran; wages from employment for
the veteran’s spouse were noted to be “-0-” for both the
previous and coming twelve-month periods. The award letter
dated in March 1991 informed him of the amount of his monthly
benefits, and, again, informed him that pension was paid to
make up the difference between countable annual income and
the maximum annual rate, that his pension was directly
related to his family’s income based on countable income,
that the VA must be notified immediately if he received any
income from any source other than that shown, and that
failure to report income changes could result in the creation
of an overpayment.
On the EVR dated in December 1991, the veteran again reported
his own Social Security benefits as his only source of
income, with total wages from employment noted to be “None.”
The award letter, dated in December 1991, again notified him
of the necessity of reporting family income, and the
consequences of the failure to so report. Subsequently, the
RO learned that the veteran’s wife was receiving Social
Security benefits, and, in August 1992, the veteran was
informed that this had resulted in an overpayment. He
requested a waiver, which was granted in September 1992.
In his EVR dated in November 1992, the veteran reported
Social Security income for himself and his wife, but, again,
reported “0” income from wages during the previous and coming
years for his wife. The award letter contained the same
information regarding countable income as the previous award
letter. The January 1994 EVR signed by the veteran once
again reported “0” income from employment during the previous
and coming years, reported Social Security as the sole source
of household income, and also reported that neither he nor
his spouse had received wages nor were employed at any time
during the past 12 months.
Subsequently, an income verification match (IVM) disclosed
that the veteran’s wife had received employment income. In
March 1994, the veteran was informed that due to verification
of income received from the veteran’s wife and her employer,
pension benefits were being reduced effective in February
1990. It was noted that benefits for the years 1991 and 1992
were also being adjusted based on employer verification;
beginning in 1993, pension benefits were adjusted because the
veteran did not provide information indicating a change in
income.
The veteran was informed that the change had resulted in a
debt to the VA of $14,017. He requested a waiver of
repayment of the overpayment. In April 1996, the amount of
the overpayment was reduced to reflect an adjustment based on
termination of the veteran’s wife’s employment in March 1993.
Current interdepartmental procedures regarding IVM’s do not
permit specific financial information contained in the
folders regarding the claimant to accompany the claims file,
or to be published in a decision. However, the only portion
of the overpayment contested by the veteran was resolved in
his favor; therefore, a separate review of this information
is not essential.
The request for waiver of recovery of the remaining
overpayment was denied on the basis that he had shown bad
faith in the creation of the debt, a statutory bar to waiver
under 38 U.S.C.A. § 5302(c) (West 1996). “Bad faith” is
defined by regulation as:
“. . . unfair or deceptive dealing by one
who seeks to gain thereby at another's
expense. Thus, a debtor's conduct in
connection with a debt arising from
participation in a VA benefits/services
program exhibits bad faith if such conduct,
although not undertaken with actual
fraudulent intent, is undertaken with intent
to seek an unfair advantage, with knowledge
of the likely consequences, and results in a
loss to the government.”
38 C.F.R. § 1.965(b)(2) (1996).
It is our opinion that the appellant’s failure to report his
wife’s earned income, particularly the affirmative act of
reporting zero employment income on the EVR’s dated in
December 1990, December 1991, November 1992, and December
1993, constituted bad faith. In this regard, he had been
informed on several occasions that the amount of his pension
benefits was based on his total family income. The
overpayment in 1992 which resulted from his failure to report
his wife’s receipt of Social Security benefits emphasized
both the requirement and the consequences thereof. His
annual EVR which reported that his wife received no
employment income was clearly a misstatement of a fact, which
resulted in unfair advantage to the appellant, in that he
received benefits to which he was not entitled; he had been
informed of the likely consequences; and it resulted in a
loss to the government in the amount of the excessive
benefits.
Additionally, we are not persuaded by his arguments regarding
his lack of knowledge that his wife’s income must be
reported. He falsely reported that she had no income, a
different matter from simply neglecting to provide
information regarding her income. Further, as described
above, he had been adequately notified on several occasions
of the requirement that he provide his entire family’s
income, including that of his wife, and of the consequences
of the failure to so report. This requirement was further
illustrated when he was assessed an overpayment for failing
to report her Social Security income in 1992. Consequently,
in view of the evidence of his intent to underreport his
income for the purpose of obtaining additional benefits, “bad
faith” is shown.
We further note that he contends that repayment of the debt
would cause financial hardship. However, since “bad faith”
in the creation of the debt has been shown, waiver of
recovery of the debt is precluded by law. 38 U.S.C.A. §
5302(c); 38 C.F.R. §§ 1.963, 1.965. Hence, the principles of
equity and good conscience, such as financial hardship, are
not for application. Further, the evidence of bad faith is
not so evenly balanced as to create a reasonable doubt; thus,
38 U.S.C.A. § 5107(a) is not for application.
ORDER
Waiver of recovery of recovery of an overpayment of improved
pension benefits created during the period from February 1990
through March 1993 is denied.
JEFF MARTIN
Member, Board of Veterans' Appeals
38 U.S.C.A. § 7102 (West Supp. 1997) permits a proceeding
instituted before the Board to be assigned to an individual
member of the Board for a determination. This proceeding has
been assigned to an individual member of the Board.
NOTICE OF APPELLATE RIGHTS: Under 38 U.S.C.A. § 7266 (West
1991 & Supp. 1997), a decision of the Board of Veterans'
Appeals granting less than the complete benefit, or benefits,
sought on appeal is appealable to the United States Court of
Veterans Appeals within 120 days from the date of mailing of
notice of the decision, provided that a Notice of
Disagreement concerning an issue which was before the Board
was filed with the agency of original jurisdiction on or
after November 18, 1988. Veterans' Judicial Review Act,
Pub. L. No. 100-687, § 402, 102 Stat. 4105, 4122 (1988). The
date which appears on the face of this decision constitutes
the date of mailing and the copy of this decision which you
have received is your notice of the action taken on your
appeal by the Board of Veterans' Appeals.
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